Credit Squeeze Defended

Press, Volume CIV, Issue 30845, 2 September 1965, Page 3

Credit Squeeze Defended

(N.Z. Press Association)

WELLINGTON, September 1

The Minister of Finance (Mr Lake) said tonight views of the Leader of the Opposition (Mr Nordmeyer) on Government measures to curb spending were “so wide of the mark as to be hardly worthy of a former Minister of Finance and an aspiring Prime Minister,”

He said the words “panic

measures” came strangely from Mr Nordmeyer. “The architect of Labour’s 1958 Budget would obviously like to transfer his reputation for crash tactics to the National Government. He cannot succeed.

“The present anti-inflation-ary measures are sound and sensible, and utterly devoid of any resemblance to the harsh and crippling taxes which were imposed on every section of the community under the 1958 black Budget.” Mr Lake said that to suggest the current measures to reduce demand were “dictated by the International Monetary Fund was equally ridiculous. “There has been no discus-

sion whatever with that organisation. If the Government decides to use its drawing rights with the 1.M.F., this will be because it is by far the cheapest world source of short-term finance available. “In its doctrinaire socialistic approach to finance, the Labour Party is still living years behind the times.” Referring to the increase from 5.84 per cent to 6.0 per cent in the maximum average interest rate trading banks may charge on overdrafts, Mr Lake reiterated that no general increase in interest rates was envisaged. “The higher average rate now permitted will, however, give the banks slightly more

flexibility to charge higher rates in certain cases where this is clearly warranted to reduce advances.

“Any increase in bank profits would be marginal and would be more than off-set by the penalty rate of 7 per cent which the trading banks were now paying to the Reserve Bank on collective borrowing of up to £l2 million. “It is nonsense to suggest that there is any connexion between the overdraft rate and the question of bank charges,’’ he said.

“Loan funds diverted from the private sector over the next 12 months will be taken out of the money stream and ‘frozen’ at the Reserve Bank,” the Minister said. (Mr Nordmeyer, Page 14)